The FTSE 100 and European stocks were lower this Friday as investors on both sides of the Atlantic fear that central banks might keep raising interest rates to cool inflation and markets come down from record highs.
The FTSE 100 (^FTSE) lost 0.47% to 7,973 points at the open, while the CAC 40 (^FCHI) in Paris dropped 0.79% to 7,305 points. In Germany, the DAX (^GDAXI) fell 0.98% to 15,380.
The UK blue chip has fallen back after its record close on Thursday following data showing stronger than expected retail sales in January.
Retail sales rose unexpectedly last month as the January sales brought people into stores. The volume of goods sold in stores and online increased by 0.5% after a 1.2% decline in December, according to the Office for National Statistics (ONS).
Economists had expected a drop of 0.3% indicating that consumers in the UK are weathering the cost of living crisis better than feared.
This increases the chance that the Bank of England will tighten monetary policy and raise interest rates higher for longer to tame inflation.
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Neil Birrell, chief investment officer at Premier Miton Investors, said: “Retail sales in the UK rose last month and were much stronger than expected, contrary to the inflation data earlier in the week. There is clearly still life in the consumer, despite ongoing pressures from impending increases in council tax, amongst other things.
“Those thinking that the Bank of England might start moderating policy in the short term will be disappointed by this number. Although, overall, the economic data is ambiguous, making the short and medium-term outlook really very uncertain.”
The money markets currently suggest there is a 72% chance that the BoE raises interest rates from 4% to 4.25% in March.
NatWest (NWG.L) plunged 8.84% despite revealing its profits surged by more than a third to reach £5.1bn last year as guidance for 2023 and beyond disappointed the City.
Shore Capital analyst Gary Greenwood said: “We expect the lower-than-expected pre-provision profit outlook may cause some disappointment.”
Meanwhile, Brent crude (BZ=F) slipped and was trading at around $83/barrel, putting oil on track track for weekly losses of 2.5% as strong US economic data heightened concerns that the Federal Reserve would further tighten monetary policy to tackle inflation, a move that could hit fuel demand.
In Asia, Tokyo’s Nikkei 225 (^N225) lost 0.66% to 27,513 points, while the Hang Seng (^HSI) in Hong Kong tumbled 1.15% to 20,745. The Shanghai Composite (000001.SS) also lost ground, slipping 0.77% to 3,224 points.
Across the pond, stocks ended lower on Thursday after unexpectedly strong inflation data and a drop in weekly jobless claims added to fears that the US Federal Reserve will keep raising interest rates to tame high prices.
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The Dow Jones (^DJI) lost 1.26% to close at 33,696 points. The S&P 500 (^GSPC) retreated 1.38% to finish at 4,090 points and the tech-heavy NASDAQ (^IXIC) slipped 1.78% to 11,855.
The US producer price index, which measures wholesale goods and services prices, rose by 6% in the year to January, higher than the 5.4% expected.
S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the red as trade began in Europe.
Watch: Wall St. ends down sharply on inflation, jobs data
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